Revised user development fee at KIA likely from April

Rs 290.80 for domestic, Rs 1,163.40 for international passengers proposed

 Last December, the City airport had an image makeover as the Kempegowda International Airport (KIA) with a hugely upgraded Terminal 1A. 

The capital expenditure incurred was bound to be compensated through a hike in the User Development Fee (UDF) levied from passengers. This increase, which was to be effective from October 1, 2013, now has a new date: April 1.

Holding consultations with all the stakeholders, the Airport Economic Regulatory Authority (AERA) had earlier rejected the Bangalore International Airport Limited (BIAL)’s proposal for a 240 per cent hike in UDF for domestic and 70 per cent for international passengers. 

AERA has now proposed a UDF of Rs 290.80 for domestic (current: Rs 231.40) and Rs 1,163.40 for international passengers (current: Rs 952.30) for the year 2014-15. For 2015-16, the revised rates are Rs 310 for domestic and Rs 1,240 for international. AERA has worked out the new rates based on a 40 per cent Shared Revenue Till (SRT) model.
 Revenue sources

This model takes into account BIAL’s revenue from all its aeronautical services and 40 per cent of its non-aeronautical revenues. Aeronautical revenues include BIAL’s earnings from (a) Landing, parking and housing (b) Fuel throughput charge (c) ICT revenues and (d) Revenues from rentals and revenue share accruing to BIAL through various aeronautical services concessioned out to third parties. Under the third party services are fuel into-plane services, cargo, ground handling, aerobridge charge and UDF.

BIAL had earlier insisted that revenue from non-aeronautical charges could not be a yardstick to fix UDF. But it relented later and agreed for UDF fixed through a 30 per cent SRT model. If AERA had accepted the rates proposed by BIAL, the UDF would have gone up to a hefty Rs 1,090.60 for domestic and Rs 4,362.41 for international passengers for 2014-15.

Balancing interests

Although AERA has proposed modified UDF rates under Single Till and the 30 per cent SRT models, it could eventually settle for the 40 per cent SRT rate. This way, as the Ministry of Civil Aviation put it, an appropriate balance could be struck between BIAL’s need for expansion funds and passenger interest. Simply put, 40 per cent of the revenue generated by BIAL from its non-aeronautical services could subsidise the UDF.

AERA has also noted that the estimated UDF collection under 40 percent SRT is higher by an amount of Rs 160 crore compared to the collection under Single Till. “This amount can thus be considered as transfer of resources from the passengers to the airport operator for the purpose of carrying out the expansion of airport facilities,” the Authority observed. 

The final UDF rates will be notified once the various stake-holders submit their comments on AERA’s latest consultation paper. The Authority has maintained that all submissions should be made by February 28, and no more extensions will be permitted. Among the stakeholders are Federation of Indian Airlines (FIA), Association of Private Airport Operators (APAO), International Air Transport Association (lATA) and BIAL.